from the protectionism,-not-innovation dept

Five years ago, we wrote a post comparing the RIAA (and the MPAA) to 17th century French buttonmakers, who used their guild to go absolutely crazy in blocking a horrifying new innovation: cloth buttons, which could be made by weavers, without making use of the members of the buttonmakers guilt. The story came from Robert L. Heilbroner's book The Worldly Philosophers (an all around excellent book if you want to learn some of the basics of the history of economics).

"The question has come up whether a guild master of the weaving industry should be allowed to try an innovation in his product. The verdict: 'If a cloth weaver intends to process a piece according to his own invention, he must not set it on the loom, but should obtain permission from the judges of the town to employ the number and length of threads that he desires, after the question has been considered by four of the oldest merchants and four of the oldest weavers of the guild.' One can imagine how many suggestions for change were tolerated.

Shortly after the matter of cloth weaving has been disposed of, the button makers guild raises a cry of outrage; the tailors are beginning to make buttons out of cloth, an unheard-of thing. The government, indignant that an innovation should threaten a settled industry, imposes a fine on the cloth-button makers. But the wardens of the button guild are not yet satisfied. They demand the right to search people's homes and wardrobes and fine and even arrest them on the streets if they are seen wearing these subversive goods."

I think the parallels to the RIAA and the MPAA are pretty self-evident. Freaking out about others entering the market? Check. Running to the government and demanding protections? Check. Expecting others to get permission to innovate? Check. Able to get government-sanctioned fines levied on those new players? Check. Feeling totally entitled to violate the property rights of others to "find" evidence of "subversive goods"? Check.

It seems this comparison between the RIAA/MPAA and protectionist, anti-innovation guilds of that era has occurred to others as well. In a recent episode of the Planet Money podcast, host Adam Davidson does a "deep dive" into the economics of a 16th century German weavers' guild and discovers the same patterns. Collusion in the guild to keep out innovation, to artificially limit the market, to keep wages of employees down and, most importantly, the first response to any competitive threat is to run to the government and lobby for greater protections.

The comparison to the RIAA and MPAA is so obvious that Adam Davidson calls it out pretty early on in the discussion, noting that these "guilds" don't seem all that different from those two groups today. Of course, given that they're both built on copyright law, which originally was designed as a protectionist tool for a similar publishers guild, perhaps the similarities aren't too surprising.

from the but-but-piracy dept

There is a saying in the political discussion in Sweden: "Anything you say before but in a political statement doesn't count." We've seen a lot of that practice in recent years with increasingly horrendous cultural monopoly laws.

People in corporate and political suits alike are climbing on top of one another to be the most statesmanlike in stating "We are fully committed to the copyright monopoly, but these proposed enforcement laws are just nuts," worded in all the synonyms you can find in a thesaurus.

Why? Why do people feel forced to phrase their views on policy like that?

If the enforcement laws are nuts, but still needed for the monopoly to be effective, why is the part before the "but" there -- where people say they support the copyright monopoly, but are firmly rejecting the laws needed keep it in effective existence for a few more years?

For I believe that the copyright industry is actually right that these ridiculous laws are needed to sustain the copyright monopoly. General-purpose networked computers, free and anonymous speech, and sustained civil liberties make it impossible to maintain this distribution monopoly of digitizable information. As technical progress can't be legislated against, basic civil liberties would have to go to maintain the crumbling monopoly. And these are the laws we're seeing on the table.

There comes a tipping point when somebody says that this entire system of cultural monopolies is absurd. A tipping point where the part before the "but" is unceremoniously and collectively dropped, the part that didn't count anyway. A tipping point where everybody just stops pretending to support it. I think it is time to create that point on the history line.

For what is the copyright monopoly, anyway? It is a set of monopolies from the era of guild-regulated commerce, when privately dictated monopolies were the norm and the expected. Specifically, the eldest tradesmen in every guild dictated what, where, and how trade happened within that craft. The copyright monopoly is a remnant from this era that should have been thrown out with the establishment of free enterprise laws in the 1850s.

Also, it is not really one single monopoly, but five quite different ones that are lumped together under a common umbrella term.

The first two types of copyright monopoly are commercial monopolies on duplication and public performance. These are the monopolies usually broken by today's free communication, the monopolies that can't coexist with today's technology and sustained civil liberties.

Then, there are two kinds of moral rights - droits morals. There is the right for the creator to prevent any performance, derivation, remix, satire, etc. of a piece that they do not approve of, and there is the right for a creator to be credited as such.

(I actually support this last right -- the right to credit. But does it really require legislation? The social, corporate and academic penalties for plagiarism are much higher than those of the law. Why is that particular law needed, then?)

The fifth monopoly isn't technically part of the copyright monopoly, but is frequently called "copyright" anyway. It is the so-called "neighboring rights" that were the result of the record industry's corporativization as IFPI in then-fascist Italy: the duplication monopoly over specific recordings. This, too, is broken by today's free communication.

I sometimes hear the old guard say that there would be no culture if there was no copyright monopoly. That is an outrageous insult to creators all over the world today. We create not because of a monopoly, but because of who we are; we have created and shared culture since we learned to put red paint on the inside of cave walls. Today, about eight years' worth of video are uploaded to YouTube every day.

People today create not because of the copyright monopoly, but despite it.

This pretense from the old guard goes well in hand with the origins of the copyright monopoly. It was never for the artists at all. When the copyright monopoly was first created on May 4, 1557, it was a means of censorship of political dissent. It lapsed in 1695. When it was reinstated in 1709, it was at the request of printers and distributors who had gathered their families on the stairs of English Parliament to claim that no culture would be printed or distributed if they didn't get their monopoly reinstated.

Nobody at the time thought to claim something as preposterous as the copyright monopoly being a precondition for people wanting to create culture. It never was.

On the contrary, it is a guild-era instrument. To show a parallel, buttonmakers in France in the 1600s went berserk when tailors bypassed them and made buttons out of cloth instead. They demanded the right to invade people's homes and search their wardrobes for violations of the guild privileges. Sound familiar?

Another parallel also happened in France, where certain popular printed cloth fabrics were monopolized. People manufactured them anyway, and the nobility responded with increasingly harsh punishments for violations of their monopolies, up to and including death by torture. Even the death penalty didn't stop that copying. How far is the copyright industry prepared to go? They never answer that question.

Any law must be necessary, effective, and proportionate: it must identify a real problem that needs legislation, it must solve that problem, and it must not create worse problems in the process. No aspect of the copyright monopoly meets these three legislative quality criteria. Therefore, I reject the concept as a whole.

I reject and oppose this monopoly that was never for the creators, but always for the distributors: a guild whose time is up and obsolete, and which has no business trampling on our civil liberties.

Let's see more people drop that part before the "but". If the copyright industry is right in saying that these laws are required to maintain the copyright monopoly, and I think they are, then that just underscores how we should stop pretending to endorse this guild-era monopoly, and instead say it is time for it to go.

And nobody will think the worse of you for stating that opinion. Quite the opposite. Nobody expects an honest politician or corpsuit.

from the sound-familiar? dept

NPR's Planet Money has started a sort of spin-off series which are direct interviews with smart people about the economy. Recently, it interviewed economist Raghuram Rajan, who is given credit as being one of the folks who accurately predicted the recent financial crisis. I'm always a little hesitant to give credit to people who "predict" financial upswings or downswings, because there's usually some serious confirmation bias problems, but Rajan definitely did a good job of calling out some of the specifics of what was likely to happen and which, subsequently, did happen. He now has a new book called Fault Lines, which suggests that many of the bigger world trends that resulted in the financial crisis are still in place, and we may be facing an even larger financial crisis going forward, since we did little to fix these underlying "fault lines." The first half of the interview is fascinating, discussing the political reality in the US that makes it nearly impossible to actually fix these problems.

However, the second half gets into a subject that is much closer to what we regularly discuss around here. In that part of the discussion, he points to certain economies that grew through the government pressuring local industry to focus on exports, with Japan being a key case study. However, he points out that by propping up a small group of these firms, it actually did great harm to local innovation and local economic efficiency. And then, at the end, he gives this example which should sound quite familiar:

Let me give an example: Japanese haircuts are extremely expensive. Part of the reason is productivity in the Japanese haircut sector is lower. So, an upstart comes up and says 'I'm going to start offering cheaper haircuts.' That's the typical way that competition pushes down prices. If you have cheaper haircuts, more Japanese will go get haircuts, and there will be more activity in the haircutting sector and you will get growth there. Well, the startup provides cheaper haircuts, but the existing barbers get anxious, because they'll have to cut prices and they're perfectly happy where they are with fewer haircuts, but getting more per haircut.

And so the "barber's guild" gets together and says: 'This is terrible. You know, this practice of offering haircuts, we have to find a way to nip it in the bud." And they have a brilliant idea. They say: "Well, offering haircuts without shampoos is un-hygienic. It's a bad idea. So, we're going to mandate that before every haircut, you have to offer a shampoo." Well, the nice thing is that all of the existing barber shops are equipped with basins and so on where you can offer a shampoo. But that new startup, because it's cutting costs and because it's cutting frills, doesn't have a basin where you can have a shampoo.

Well, in one stroke, in requiring a shampoo before a haircut, you've raised the cost of doing business for the startup. You've driven the startup to a corner. And, typically, they can't compete any more. And you've preserved the way of life for the existing barbers. In the process, though, you've far fewer haircuts in Japan than if you'd allowed much more competition.

You can see this play out in many sectors: transport, retail, construction. Where a few incumbents sort of monopolize what's going on and don't allow the kind of growth that would allow Japan domestic sources of growth as distinct from the export-sources of growth, which it typically relies on.

This is such a key point that gets overlooked in so many discussions, but is really the key theme about a very large percentage of posts on this site: recognizing the difference between real economic growth that comes from innovation that leads to a greater actual market size, and fake economic growth that comes from just the process of moving money around.

But that story of the Japanese barbershop sounds pretty damn familiar, right? It's the same story we just heard about hotels in New York trying to outlaw couch surfing. Or, as someone on Twitter referred to it: "Home sleeping is killing hotels." Or the story of a online carpooling efforts sued and fined for competing with the local bus company.

What's impressive, of course, is how the incumbents are almost always able to hinder the more economically efficient solutions -- the innovations that actually lead to real growth in the market -- by couching it in terms that make them look like they're being altruistic. In the Japanese haircut examples, it was about hygiene. In the stories about couch surfing and carpooling, it's about "safety." With the music and movie industries shutting down more efficient tools for distribution and promotion, it's about "protecting creators' rights." Of course, none of these are true. They're all just efforts to protect incumbent monopoly rents, so that they can be less efficient, collect more direct profit, but hold back overall economic growth and consumer surplus.

I think it's important to start calling out these sorts of ploys. Perhaps we should refer to them as "home sleeping is killing hotels" arguments, and point folks to Dan Bull's song on the subject:

from the the-new-unions dept

Nearly a year ago we wrote about how "professional" groups and organizations where professionals are required to obtain a license and abide by certain rules are really a new type of anti-competitive union, hidden beneath the veneer of public interest. I should be clear up front, as someone who actually has a degree in this stuff, and spent plenty of time with unions that I have no problem with the concept of collective bargaining. The problem is that many union activities are less about collective bargaining and more about anti-competitiveness. It appears that Forbes has now stepped up to the plate with a very similar article to ours, noting that professional organizations are the new unions, not only hiding behind bogus claims of public interest, but also doing a lot more harm than good in many cases. As the article notes, these professional licensing organizations raise fees, shrink the labor pool and often make things less safe -- by encouraging people to do dangerous things they might otherwise hire a professional to do, if that professional weren't kept artificially expensive. In effect, the arguments in favor of these types of licenses are similar to the arguments in favor of DRM or other limitations on a market. While they may sound good upfront to those in a position to leverage the monopoly power granted by them, the unintended consequences over the long term harm everyone.